Platts remains open to dialogue on Dated Brent overhaul

London — S&P Global Platts affirmed on March 3 its commitment to continue consulting with market participants on a planned overhaul of the Dated Brent price benchmark that is used to measure the value of more than half the world's crude.

The price reporting agency was responding to feedback from the industry following the announcement on Feb 22 of its intention to make two major changes to the world's biggest crude benchmark.

"The overwhelming feedback we have received is that WTI Midland coming into Dated Brent makes a lot of sense, given the continued depletion of North Sea crude oil fields," said Joel Hanley, Global Director, Crude & Fuel Oil at Platts, during an online workshop organized by the company to address concerns.

Platts has been consulting with the market on including US WTI Midland crude from July 2022 cargoes to the Dated Brent complex, broadening what has been an exclusively North Sea-based assessment.

The company said it will organize a series of working groups in the coming months, which will focus on standardizing the trading terms and conditions for the related Cash BFOE market and the various Brent-related price instruments.

Platts has also said the benchmark will switch to a CIF Rotterdam basis -- meaning crudes will be assessed on the basis of deliveries into Europe's largest trading hub -- rather than including loadings at terminals around the region.

"Bringing WTI Midland into the benchmark on a CIF basis provides the simplest path for the addition of what is now a popular and reliable light, sweet grade in Europe," added Hanley.

The company has received a broad spectrum of responses during its consultation on the proposed changes. Some traders have welcomed the move as a "necessary modification," while some have expressed concerns over the potential impact on derivatives.

Light sweet crude

WTI Midland has become a mainstay for European crude imports and a core part of the North Sea oil market.

The US light sweet grade is a good fit to join the traditionally North Sea basket, given it is already closely aligned in terms of price, quality and consumption with the five grades: Brent, Forties, Oseberg, Ekofisk and Troll.

Meanwhile, the Intercontinental Exchange (ICE) said Feb. 26 that crude futures and swaps contracts listed up to June 2022 and referencing the Platts Dated Brent assessment in its current form would remain valid even after Platts switches to a new methodology for the assessment in July 2022.

In a circular, ICE said it was considering listing successor contracts referencing the new assessments that would exist in parallel to contracts referencing the current assessments.

Many of the Brent assessments are used as a reference for settling various types of crude oil futures contracts on the exchange.

Platts has also it would continue publishing an FOB reference value for Dated Brent, calculated as a net-back from loadings of the current Dated Brent grades, using a basket of Platts-assessed freight rates.

Platts, which publishes the daily Dated Brent assessment that underpins the majority of the world's oil trade, first asked for feedback on the addition in 2018.

Platts Dated Brent price assessments have undergone a number of changes over time, intended to ensure their relevance in changing market conditions. With the decline of UK fields such as Brent, a number of Norwegian grades have been added, most recently the Troll crude blend, in 2018.